The market gapped up by 3.8%, gave up all of it gains and then ripped to new highs ahead of the close. That said, here’s a few top stock trades for Wednesday.
Top Stock Trades for Tomorrow No. 1: Amazon (AMZN)
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Amazon (NASDAQ:AMZN) caught my eye on Monday, as the S&P 500 fell almost 8% for the day.
Here’s a stock with a near-$1 trillion market cap that had lagged its mega-cap peers for months. In January, we finally got a big-time breakout in the stock as Amazon approached $2,175. However, it could not surpass this level and had succumbed to the recent selling pressure.
The stock is still trying to hold up, though. It didn’t retest Monday’s low like the S&P 500 did in early Tuesday trading. In fact, it’s trying to build off those lows, as bulls circle the name looking for some value down more than 12% from the highs.
Here’s what I need to see now. Over the $1,863 mark puts AMZN above the 100-day and 200-day moving averages. It puts $1,900 in play, as well as the 50-day moving average. Above that, and $2,000 is possible.
Below $1,800 and uptrend support, however, and Monday’s low is in play. Below that, and technically speaking, $1,700 is possible.
Top Stock Trades for Tomorrow No. 2: Dick’s Sporting Goods (DKS)
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A promising play turned ugly, as Dick’s Sporting Goods (NYSE:DKS) gave up most its post-earnings gains on Tuesday. Worse, the high came just below the 200-day moving average.
Now investors need to see the $33 mark hold as support. Should it fail, it puts the $31 low from August in play. If it does hold as support, look for a rebound back up to the mid-$30s, with $38 in focus should DKS gain momentum.
Overall, it’s never a good day to see this type of action — particularly when the S&P 500 is up notably on the day.
Top Stock Trades for Tomorrow No. 3: American Airlines (AAL)
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I haven’t liked American Airlines (NASDAQ:AAL) for a while, but I will not pretend that I expected a decline of this magnitude or predicted a coronavirus scare.
This stock had been trading in a declining channel for years, with the 50-week moving average weighing on the stock. Once the $25 mark gave way as support, a violent decline took place as American Airlines stock knifed right through channel support.
Now finding buyers near $15, the stock is working on a rebound after announcing a capacity cut. I want to see if AAL can get up to the $19 to $20 area. From there, let’s see if it can gravitate higher, or if prior channel support turns to resistance.
Top Stock Trades for Tomorrow No. 4: Bristol-Myers Squibb (BMY)
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After closing its acquisition of Celgene, Bristol-Myers Squibb (NYSE:BMY) has been quite strong. However, the coronavirus-induced selling pressure caused uptrend support to fail (blue line). The 50-day moving average also gave way, as has the 100-day moving average.
Now, $56 is on the line. And if BMY loses this mark, it puts a decline down to $54 in the cards. Here the stock has the 200-day moving average and gap-up support from October. A move down to around $53 will fill the gap.
On the upside — whether BMY stock tests lower or not — look to see if shares can reclaim the 100-day moving average. If the stock can, $62.25 is on watch, followed by the 50-day moving average.
Top Stock Trades for Tomorrow No. 5: United Airlines (UAL)
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Like American Air, United Airlines (NASDAQ:UAL) is ripping higher on Tuesday — and there is a great lesson in this chart.
When bad news is rampant for a certain company or industry, the stock can get hammered beyond most investors’ assumptions. That makes buying on the way down a very difficult and dangerous thing to do, and is referred to as “catching a falling knife.”
With United Airlines, there was no telling if the low was at $65, $57.50 or $50.
After a precipitous decline, investors finally — finally — have a low in the stock. That’s around $46, as traders can now measure against this mark to size up their risk appropriately. A break of $46 that’s not quickly reclaimed could lead to more selling. But at least for now, this is the short-term bottom. So let’s see if it turns into the long-term low.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long BMY.
